Gridlock in the Budget Process

In his last post, my research colleague Chris Hellman explained where we are in the annual federal budget process. He noted that President Obama released a budget in February; the House passed a very different budget in March; and the Senate has declined to do a budget. The seeds are planted for stalemate this election year, Chris wrote. If Congress cannot pass a budget for President Obama to sign by Oct. 1 – which is the start of fiscal year 2013 – then lawmakers will have to pass temporary spending legislation, called continuing resolutions, to fund the federal government.

Why can't Congress just pass a budget without all this conflict?

Politics has a lot to do with it. But there's also enormous disagreement over an essential ingredient: Taxes.

Tax revenue is half of the budget; the other half is spending. Sure, there's disagreement over spending, too, but taxes are a major sticking point between the two parties. Leaders in the Republican party have stated their unwillingness to raise taxes of any kind, and have proposed reducing taxes to boot. Meanwhile, President Obama and other Democrats have expressed overwhelming support for raising taxes on wealthy taxpayers to help reduce budget deficits. In his fiscal 2013 budget, the president proposed allowing the Bush-era tax cuts to expire for the wealthiest 2 percent of Americans. And the president has also proposed the Buffett Rule, which would place a minimum tax on millionaires. The Congressional Progressive Caucus, a group of progressive Democrats in the House, wants to add tax brackets for millionaires and billionaires.

In stark contrast, House Budget Chairman Paul Ryan (R-WI) proposed reducing top marginal tax rates, which are the rates that apply to wealthy earners. So while Republican lawmakers reject all tax increases, Democrats propose using tax increases on the wealthy as a crucial part of reducing budget deficits. And therein lies a stalemate.